The Exchange Rate of the Yen Against the US Dollar is Still Hovering

Despite the background of the intensification of China-US trade wars and the strengthening of monetary easing by central banks around the world, the exchange rate of the yen against the US dollar is still hovering around US$106, and the appreciation of the yen is limited. The background is that in terms of actual demand for overseas direct investment, the factors driving the purchase of the US dollar and the selling of the Japanese yen are strengthening. Changes in investment and trade structure have played a role in suppressing the rapid appreciation of the yen.

In the Tokyo foreign exchange market on September 4, the yen exchange rate was around US$106. On the 3rd, the US Institute for Supply Management (ISM) released the August manufacturing boom index, which fell below the 50-point line in three years. The risk of economic slowdown has strengthened, but there has not been a rapid appreciation of the yen. In late August, due to the tariff confrontation between China and the United States, the yen rose to around 104 yen, but the current market showed a slight stability. In addition, investors are strengthening their wait-and-see attitude before the policy meeting in Japan, the US and Europe.

Uchida of Mitsubishi UFJ Bank pointed out that “the sale of yen with actual demand has played a role in curbing the rapid appreciation of the yen.” If we look at cross-border capital flows in areas such as trade and investment, several factors of bad yen have surfaced. For example, trade statistics from January to July show that the export value is 44.9 trillion yen, while the import value is 46 trillion yen, which is even larger. Due to the reduced demand caused by Sino-US friction, factors such as the decline in exports of electronic components to China are affecting.

For the first time, the income and expenses of the overseas subsidiaries of the Japanese company were 10.6 trillion yen from January to June, and the exchange of foreign exchange into the yen became a factor of buying the yen. On the other hand, direct investment in Japanese companies such as overseas companies and factory construction has a net purchase of 13.6 trillion yen in foreign assets. Kanda, of the Research Institute, also said that “the tendency of Japanese companies to find a way to survive overseas is still maintained in the context of a shrinking domestic market.”


Renesas Electronics, a Japanese semiconductor company, spent $6.3 billion in March to acquire the US-based Integrated Device Technology (IDT), which is active overseas.


The investment in medium and long-term debt also saw a net purchase of 4.6 trillion yen in external assets from January to July. Fujishiro Hiroshi of the First Institute of Life Economics pointed out that “in the context of the decline in the yield of Japanese government bonds, there is a tendency to buy US Treasury bonds for the pursuit of high yields.” Japan’s domestic long-term interest rate fell to a negative level of 0.295% on the 4th. The drop in interest rates has boosted investment in overseas bonds and brought about a side effect of the yen’s depreciation.